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Purchasing life insurance is for the welfare of young children, par-ticularly preteens, who are liquidity constrained. In this paper, we present a life cycle model of life insurance that takes into account the ages of these young beneciaries. We show that, as the child ages, the need for...
Persistent link: https://www.econbiz.de/10011398104
Recent theoretical work shows that precautionary savings increase in response to an increase in first-order risk. In … welfare effect of future income uncertainty. We build a model of remittances and savings under income uncertainty and show … that an immigrant will increase his remittances in response to a first-order risk decrease in future income. Using changes …
Persistent link: https://www.econbiz.de/10011300358
premium. Intuitively, a rise in uninsured wage risk increases precautionary savings, thereby boosting capital accumulation …, individual wage risk has also increased. This paper proposes a mechanism through which a rise in wage risk increases the skill … that the rise in wage risk observed between 1967 and 2010 increases the skill premium significantly. This finding is robust …
Persistent link: https://www.econbiz.de/10012263817
derive a general analytic formula for the "risk premium" governing the resulting climate policy. The formula generalizes … simple precautionary savings analysis to more complex economic interactions and it builds the economic intuition for policy … making under uncertainty. It clarifies the distinct roles of risk aversion, prudence, characteristics of the damage …
Persistent link: https://www.econbiz.de/10012597858
of savings, precautionary savings, loss aversion, and risk. We provide the relevant theory, followed by empirical tests …We consider a simple, two period, consumption-savings model with future income uncertainty that examines the interplay … present bias. We predict, and show empirically, that loss aversion reduces savings, and that those who are more loss averse …
Persistent link: https://www.econbiz.de/10014315431
We study optimal savings in continuous time with exogenous transitions between employment and unemployment as the only …
Persistent link: https://www.econbiz.de/10011941404
In the expected-utility theory of the monetary value of a statistical life, the so-called dead-anyway effect discovered … risk increases with the initial level of risk. Their reasoning is based on differences in the marginal utility of wealth …: first, for a risk-averse individual without a bequest motive, marginal WTP for survival does increase with the level of risk …
Persistent link: https://www.econbiz.de/10011514002
We show how optimal saving in a two-period model is affected when prudence and risk aversion of the underlying utility … function change. Increasing prudence alone will induce higher savings only if, for certain combinations of the interest rate … and the pure time discount rate, there is distributional neutrality between the two periods. Otherwise, changes of risk …
Persistent link: https://www.econbiz.de/10003772158
degree of pessimism of the representative agent is the mean of the individual ones weighted by their index of absolute risk …
Persistent link: https://www.econbiz.de/10011507677
first-order approximated solution built by perturbation methods accounts for risk. We show that risk matters economically in … a real business cycle (RBC) model with habit formation and capital adjustment costs and that neglecting risk leads to …
Persistent link: https://www.econbiz.de/10012211025